STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of the ___
day of _____________, 1997 (the "Effective Date"), by and between Ligand
Pharmaceuticals Incorporated, a Delaware corporation (the "Company"), and Xxx
Xxxxx and Company, an Indiana corporation ("Investor").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Shares.
1.1 Sale and Issuance of Shares. Subject to the terms and
conditions of this Agreement, Investor agrees to pay Thirty-Seven Million Five
Hundred Thousand ($37,500,000) (the "Purchase Price") to the Company at the
Closing and the Company agrees to sell and issue to Investor at the Closing the
number of shares (the "Shares") of the Company's Common Stock equal to the
Purchase Price divided by one hundred twenty percent (120%) of the average daily
closing price of the Company's Common Stock reported by the National Association
of Securities Dealers ("NASD") beginning on August 15, 1997 and continuing
through and including September 12, 1997, which amount is $17.23125 per share,
resulting in a total of two million one hundred seventy-six thousand two hundred
seventy-nine (2,176,279) Shares.
1.2 Closing. The closing for the purchase and sale of the Shares
shall take place at the offices of Xxxxxxx, Phleger & Xxxxxxxx LLP, 000 Xxxx "X"
Xxxxxx, Xxxxx 0000, Xxx Xxxxx, Xxxxxxxxxx, on the third business day following
the date of this Agreement, or at such other time and place as the Company and
Investor mutually agree upon orally or in writing (which time and place are
designated as the "Closing"). At the Closing, the Company shall deliver to
Investor a certificate representing the Shares. In consideration of such
delivery, Investor shall make payment therefor by delivery to the Company by
Investor of a check in the amount of the Purchase Price payable to the Company's
order or by wire transfer of funds in such amount to the Company's designated
bank account.
2. Representations and Warranties of the Company. Except as
otherwise set forth on the Schedule of Exceptions attached hereto as Exhibit A,
the Company hereby represents and warrants to Investor that:
2.1 Organization, Good Standing and Qualification. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure so to qualify would be
reasonably expected to have a material adverse effect on the business,
operations, properties, assets, prospects or condition (financial or otherwise)
of the Company (a "Material Adverse Effect"). Except as disclosed in the Form
10-K (as defined herein), the Company has no subsidiaries.
2.2 Authorization. The Company has all requisite corporate power
and authority (i) to execute, deliver and perform its obligations under this
Agreement; (ii) to issue the
Shares in the manner and for the purpose contemplated by this Agreement, and
(iii) to execute, deliver and perform its obligations under all other agreements
and instruments executed and delivered by it pursuant to or in connection with
this Agreement. All corporate action on the part of the Company, its officers,
directors and stockholders necessary for the authorization, execution and
delivery of this Agreement, the performance of all obligations of the Company
hereunder and the authorization, issuance (or reservation for issuance) and
delivery of the Shares has been taken or will be taken prior to the Closing, and
this Agreement constitutes a valid and legally binding obligation of the
Company, enforceable in accordance with its terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors' rights generally and
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies.
2.3 Valid Issuance of Securities. The Shares which are being
purchased hereunder, when issued, sold and delivered in accordance with the
terms hereof for the consideration expressed herein, will be duly and validly
issued, fully paid and nonassessable and, based in part upon the representations
of Investor in this Agreement, the Shares will be issued in compliance with all
applicable federal and state securities laws.
2.4 SEC Reports. The Company has heretofore filed with the
Securities and Exchange Commission (the "SEC") pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), all reports and other
documents required to be filed, including an Annual Report on Form 10-K for the
year ended December 31, 1996 (the "Form 10-K"). None of such reports, or any
other reports, documents, registration statements, definitive proxy materials
and other filings required to be filed with the SEC under the rules and
regulations of the SEC (the "SEC Filings") contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary in order to make the statements made, at the time and in light of the
circumstances under which they were made, not misleading. Since December 31,
1996, the Company has timely filed with the SEC all SEC Filings and all such SEC
Filings complied in all material respects with all applicable requirements of
the Securities Act of 1933, as amended (the "Securities Act"), the Exchange Act,
and the rules thereunder. The audited financial statements of the Company
included or incorporated by reference in the 1996 Annual Report to the
Stockholders (the "1996 Annual Report") and the unaudited financial statements
contained in the Quarterly Reports on Form 10-Q each have been prepared in
accordance with such acts and rules and with United States generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated therein and with each other (except as may be indicated therein or in
the notes thereto and except that the unaudited interim financial statements may
not contain all footnotes and adjustments required by United States generally
accepted accounting principles) and fairly present the financial condition of
the Company as at the dates thereof and the results of its operations and
statements of cash flows for the periods then ended, subject, in the case of
unaudited interim financial statements, to normal year-end adjustments. Except
as reflected in such financial statements, the Company has no material
liabilities, absolute or contingent, other than ordinary course liabilities
incurred since the date of the last such financial statements in connection with
the conduct of the business of the Company. Since December 31, 1996, except as
set forth in the Company's SEC Filings, there has been no:
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(a) change in the assets, liabilities, financial condition
or operating results of the Company from that reflected in the 1996 Annual
Report, except changes in the ordinary course of business that have not,
individually or in the aggregate, resulted in and are not reasonably expected to
result in a Material Adverse Effect (and except that the Company expects to
continue to incur substantial operating losses, which may be material);
(b) damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the business, properties or
financial condition of the Company (and except that the Company expects to
continue to incur substantial operating losses, which may be material);
(c) waiver or compromise by the Company of a material
right or of a material debt owed to it;
(d) satisfaction or discharge of any lien, claim or
encumbrance by the Company, except in the ordinary course of business and which
is not material to the business, properties or financial condition of the
Company (as such business is presently conducted);
(e) material change to a material contract or arrangement
by which the Company or any of its assets is bound or subject;
(f) sale, assignment or transfer to a third party that is
not an affiliate of the Company (as hereafter defined) of any material patents,
trademarks, copyrights, trade secrets or other intangible assets for
compensation which is less than fair value;
(g) mortgage, pledge, transfer of a security interest in,
or lien, created by the Company, with respect to any of its material properties
or assets, except liens for taxes not yet due or payable;
(h) declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock, except any direct
or indirect redemption, purchase or other acquisition of any such stock by the
Company; or
(i) event or condition of any type that has had or is
reasonably expected to have a Material Adverse Effect.
For purposes of this Section 2.4 of this Agreement, the term
"affiliate of the Company" means any individual or entity directly or indirectly
controlling, controlled by or under common control with, the Company. Without
limiting the foregoing, the direct or indirect ownership of 50% or more of the
outstanding voting securities of any entity, or the right to receive 50% or more
of the profits or earnings of an entity, shall be deemed to constitute control.
2.5 Contracts. With respect to each of the material contracts,
commitments and agreements of the Company, the Company is not, and has no actual
knowledge that any other party is, in default under or in respect of any such
material contract, commitment or agreement, the result of which default would
have a Material Adverse Effect. No party to any such material
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contract, commitment or agreement, would be authorized or permitted to terminate
its obligations thereunder by reason of the execution and delivery of this
Agreement or any of the transactions contemplated herein.
2.6 Compliance. The Company has complied with, and is not in
default under or in violation of its Certificate of Incorporation or Bylaws,
each as amended through the date hereof, or any and all laws, ordinances and
regulations or other governmental restrictions, orders, judgments or decrees,
applicable to the Company's business as presently conducted and as proposed to
be conducted, including individual products marketed by it, where any such
default or violation would have a Material Adverse Effect. The Company has not
received notice of any possible or actual violation of any applicable law,
ordinance, regulation or order, the result of which violation would be
reasonably expected to have a Material Adverse Effect. The Company is not a
party to any agreement or instrument, or subject to any charter or other
corporate restriction, or any judgment, order, decree, law, ordinance,
regulation or other governmental restriction which would prevent or impede, or
be breached or violated by, or would result in the creation of any event of
default or the creation of any lien or encumbrance upon any assets of the
Company by, the transactions contemplated in this Agreement, except that no
representation or warranty is made with respect to filings required by the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "H-S-R
Act").
2.7 Compliance with Other Instruments. The execution, delivery
and performance of this Agreement and of the transactions contemplated hereby
will not result in any violation of or constitute, with or without the passage
of time and the giving of notice, either a default under any provision of the
Company's Amended and Restated Certificate of Incorporation or Bylaws, each as
amended through the date hereof.
2.8 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority is required on
the part of the Company in connection with the Company's valid execution,
delivery and performance of this Agreement, except for any filings under any
applicable state securities laws and except for any filing under the H-S-R Act.
The filings under state securities laws, if any, will be effected by the Company
at its cost within the applicable stipulated statutory period.
2.9 Litigation. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company which
questions the validity of this Agreement, or the right of the Company to enter
into such agreement or to consummate the transactions contemplated hereby or
thereby. There is no action, suit, proceeding or investigation pending or
currently threatened against the Company, which singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would be reasonably
expected to have a Material Adverse Effect.
2.10 Permits. Except as disclosed in the SEC Filings (including,
among other things, the lack of FDA approvals for the commercial sale of the
Company's product candidates), the Company has all governmental franchises,
permits, licenses, and any similar authority necessary for the conduct of its
business as now being conducted by it or as proposed to be
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conducted by it, the lack of which could have a Material Adverse Effect. The
Company is not in default in any material respect under any of such franchises,
permits, licenses or other similar authority.
2.11 Taxes. The Company has filed all federal, state and other
tax returns which are required to be filed and has heretofore paid all taxes
which have become due and payable, except where the failure to file or pay would
not be reasonably expected to have a Material Adverse Effect. The provision for
taxes on the balance sheet as of December 31, 1996 is sufficient for the payment
of all accrued and unpaid taxes of the Company with respect to the period then
ended.
2.12 Title. The Company has good and marketable title to all
material property and assets reflected in the financial statements to the 1996
Annual Report (or as described in the SEC Filings). The Company occupies its
leased properties under valid and binding leases conforming to the description
thereof set forth in the SEC Filings.
2.13 Intellectual Property. The Company owns, or possesses
adequate rights to use, all of its patents, patent rights, trade secrets,
know-how, proprietary techniques, including processes and substances,
trademarks, service marks, trade names and copyrights described or referred to
in the SEC Filings or owned or used by it or which is necessary for the conduct
of its business as presently conducted, except where the failure to own or
possess such patents, patent rights, trade secrets, know-how, proprietary
techniques, including processes and substances, trademarks, service marks, trade
names and copyrights would not have a Material Adverse Effect. The Company has
not received any notice of infringement of or conflict with asserted rights of
others with respect to any patents, patent rights, trade secrets, know-how,
proprietary techniques, including processes and substances, trademarks, service
marks, trade names and copyrights which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would be reasonably
expected to have a Material Adverse Effect.
2.14 Capitalization; Options and Warrants. The authorized capital
stock of the Company consists of Eighty-Five million (85,000,000) shares, of
which Eighty million (80,000,000) shares are Common Stock, par value $0.001 per
share, and Five million (5,000,000) shares are Preferred Stock, par value $0.001
per share, of which Eighty thousand (80,000) shares have been designated Series
A Participating Preferred Stock. As of July 31, 1997, 32,859,502 shares of the
Company's Common Stock and no shares of Preferred Stock were issued and
outstanding. Except for the transactions contemplated hereby and except as set
forth in the Company's SEC Filings, since December 31, 1996, the Company has not
granted any option (except for stock options granted under the Company's stock
option plans), warrants, rights (including conversion or preemptive rights,
except for stock purchased under the Company's stock purchase plans), or similar
rights to any person or entity to purchase or acquire any rights with respect to
any shares of capital stock of the Company that in the aggregate exceed two
million (2,000,000) shares.
2.15 Nasdaq National Market Designation. The Company's Common
Stock is currently included in the Nasdaq National Market and the Company knows
of no reason or set of facts which is likely to result in the termination of
inclusion of the Common Stock in the Nasdaq
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National Market or the inability of such stock to continue to be included in the
Nasdaq National Market. Nothing in this Agreement shall be interpreted to
preclude the Company from listing its Common Stock on a national securities
exchange in lieu of the Nasdaq National Market.
2.16 Accuracy of Representations and Warranties. No
representation or warranty by the Company contained in this Agreement, and no
statement contained in any exhibit, schedule, disclosure, certificate, list or
other instrument delivered or to be delivered to the Investor pursuant hereto or
in connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the statements contained herein or therein not misleading.
3. Representations and Warranties of the Investor. Investor
hereby represents and warrants that:
3.1 Organization, Good Standing and Qualification. Investor is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Indiana and has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted.
3.2 Authorization. All corporate action on the part of Investor,
its officers and directors necessary for the authorization, execution and
delivery of this Agreement, the performance of all obligations of Investor
hereunder has been taken or will be taken prior to the Closing, and this
Agreement constitutes a valid and legally binding obligation of Investor
enforceable in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the enforcement of creditors' rights generally and (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies.
3.3 Purchase Entirely for Own Account. The Shares to be received
by Investor will be acquired for investment for Investor's own account, not as a
nominee or agent, and not with a view to the resale or distribution of any part
thereof, and Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same. By executing this
Agreement, Investor further represents that Investor does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Shares. Investor represents that it has full power and authority to enter into
this Agreement.
3.4 Investment Experience. Investor acknowledges that it is able
to fend for itself, can bear the economic risk of its investment and has such
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment in the Shares. Investor also
represents it has not been organized for the purpose of acquiring the Shares.
3.5 Accredited Investor. Investor is an "accredited investor"
within the meaning of SEC Rule 501 of Regulation D, as presently in effect.
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3.6 Restricted Securities. Investor understands that the Shares
it is purchasing are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such Shares may be resold without registration under the
Securities Act, only in certain limited circumstances. In this connection,
Investor represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the
Securities Act.
3.7 Further Limitations on Disposition. Without in any way
limiting the representations set forth above, Investor further agrees not to
make any disposition of all or any portion of the Shares unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
Sections 3.7, 4.2 and 5 of this Agreement, if applicable, and:
(a) There is then in effect a Registration Statement under
the Securities Act covering such proposed disposition and such disposition is
made in accordance with such Registration Statement; or
(b) (i) Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a reasonably
detailed statement of the circumstances surrounding the proposed disposition,
and (ii) if reasonably requested by the Company, such Investor shall have
furnished the Company with an opinion of counsel (which may be Investor's inside
counsel), in form and substance reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
Notwithstanding the foregoing, this Section 3.7 and Sections 4.2 and 5 shall not
apply to a transferee in a registered public offering or a sale under Rule 144;
provided Section 4.2 shall not apply to a transferee which receives less than
one percent (1%) of the outstanding Common Stock of the Company at such time as
the Investor owns Shares which represent less than three percent (3%) of the
outstanding Common Stock of the Company; provided further Section 5, by its
terms, does not apply at such time as the Investor owns Restricted Securities
which represent less than three percent (3%) of the outstanding Common Stock of
the Company.
3.8 Legends. It is understood that the certificates evidencing
the Shares may bear one or all of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933, as amended. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in effect
with respect to the securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not required or unless
sold pursuant to Rule 144 of such Act."
(b) "These securities are subject to certain transfer
restrictions contained in a certain Stock Purchase Agreement dated ____________,
1997, as amended from time to time, a copy of which may be obtained from the
corporation without charge."
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(c) Any legend required by any applicable state securities
laws.
To the extent that such legends are no longer applicable, the
Company shall cause its transfer agent to remove the legends upon request by
Investor.
3.9 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority is required on
the part of Investor in connection with the Investor's valid execution, delivery
and performance of this Agreement or the issuance of the Shares, except for any
filings under any applicable federal or state securities law and except for any
filing under the H-S-R Act.
4. Covenants of Investor.
4.1 Transfer Restriction. Investor hereby agrees that during the
time period commencing as of the Closing until the first anniversary of the
Effective Date (with such time period being referred to as the "Initial
Restricted Period"), that neither it nor any affiliate shall, directly or
indirectly sell, offer to sell, contract to sell (including, without limitation,
any short sale), grant any option to purchase or otherwise transfer or dispose
of (other than to donees who agree to be similarly bound) any of the Shares, any
securities acquired pursuant to Section 7.11 or any securities issued to
Investor pursuant to that certain Wholesale Purchase Agreement between the
Company and Investor dated the date hereof (the "Wholesale Agreement")
("Restricted Securities") at any time during the Initial Restricted Period.
Investor hereby also agrees that during the time period commencing as of the
last day of the Initial Restricted Period until the second anniversary date of
the Effective Date (with such time period being referred to as the "Follow-On
Restricted Period"), that neither it nor any affiliate shall, directly or
indirectly sell, offer to sell, contract to sell (including, without limitation,
any short sale), grant any option to purchase or otherwise transfer or dispose
of (other than to donees who agree to be similarly bound) any of the Restricted
Securities at any time during the Follow-On Restricted Period other than in
compliance with the volume restrictions then set forth under Rule 144 (or its
successor rule) promulgated under the Securities Act ("Rule 144") (even if such
volume limitations are not applicable to Investor under such rule). In order to
enforce the foregoing covenant, the Company may impose legends and/or
stop-transfer instructions with respect to the Restricted Securities held by
Investor (and the Restricted Securities of every other person subject to the
foregoing restriction) until the end of such periods. Following the last day of
the Follow-On Restricted Period, any restrictions under this Section 4.1 shall
terminate and be of no further force and effect.
4.2 Standstill Provisions. Commencing as of the Closing and
through the fifth anniversary of the Effective Date, Investor (including all
affiliates (as defined in Rule 144) of Investor ("Affiliate")) shall not acquire
beneficial ownership of any shares of Common Stock of the Company, any
securities convertible into or exchangeable for Common Stock, or any other right
to acquire Common Stock, except by way of stock dividends or other distributions
or offerings made available to holders of Common Stock generally (collectively,
"Company Stock"), from the Company or any other person or entity, such that such
beneficial ownership of
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Investor (together with all Affiliates) shall be greater than ten percent (10%)
of the Company's outstanding Common Stock without the prior written consent of
the Company, which consent may be withheld in its sole discretion; provided,
however, that in no event shall (i) the original purchase of Shares pursuant to
this Agreement, (ii) the subsequent issuance of shares of the Company's Common
Stock pursuant to the Wholesale Agreement or (iii) the acquisition by Investor
(or an Affiliate) of another Company that at the time of the acquisition owns
securities of the Company constitute a violation of this Section 4.2. In
addition, the prohibition on acquisition of beneficial ownership under this
Section 4.2 shall not prevent an Affiliate of Investor from acquiring beneficial
ownership of securities of the Company, provided such Affiliate is formed
primarily for the purpose of investing in the securities of companies other than
Investor or its Affiliates.
4.3 Termination Upon Certain Events. Notwithstanding the
foregoing, in the event that:
(i) a Person has taken all steps legally required to
commence a formal tender offer, or has publicly announced its intention to
commence a formal tender offer; or
(ii) the Board of Directors of the Company has made a
decision to actively consider disposing of all or substantially all of the
assets of the Company, or merging or consolidating with another entity (other
than a merger or consolidation effected for tax purposes or to change the
domicile of the Company to any state in the United States), as evidenced by its
public announcement of the transaction or its action to formally engage an
investment banker to locate a Person interested in acquiring the Company,
whichever occurs first; or
(iii) any "Person" (as defined herein) becomes the
"Beneficial Owner" (as defined herein) of 30% or more of the shares of Common
Stock of the Company after the date hereof;
Section 4.2 shall cease to have effect and Investor (or any Affiliates) may
acquire and beneficially own more than ten percent (10%) of the Common Stock of
the Company (assuming the full conversion and exercise of all convertible and
exercisable securities of the Company held by Investor and its Affiliates).
4.4 Definitions.
(a) "Person" as used herein shall mean any individual,
corporation, partnership, firm, association, unincorporated organization, joint
venture, trust or other entity, and shall include any successor (by merger or
otherwise) of such entity, or any of the foregoing acting together as a group,
but shall specifically exclude Investor (or any Affiliate of Investor).
(b) A Person shall be deemed to be the "Beneficial
Owner" of and shall be deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's
Affiliates
9
beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's
Affiliates has (A) the right to acquire, exercisable immediately, pursuant to
any agreement, arrangement or understanding (other than customary arrangements
with and between underwriters and selling group members with respect to a bona
fide public offering of securities), or upon the exercise of conversion rights
or exchange rights, warrants or options or otherwise; provided, however, that a
Person shall not be deemed the Beneficial Owner of, or to beneficially own,
securities tendered pursuant to a tender or exchange offer made by or on behalf
of such Person or any of such Person's Affiliates until such tendered securities
are accepted for purchase or exchange; or (B) the right to vote pursuant to any
agreement, arrangement or understanding; provided, however, that a Person shall
not be deemed the Beneficial Owner of, or to beneficially own, any security if
the agreement, arrangement or understanding to vote such security (1) arises
solely from a revocable proxy or consent given to such Person in response to a
public proxy or consent solicitation made pursuant to, and in accordance with,
the applicable rules and regulations promulgated under the Exchange Act and (2)
is not also then reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person with which such Person or any of such Person's
Affiliates has any agreement, arrangement or understanding (other than customary
agreements with and between underwriters and selling group members with respect
to a bona fide public offering of securities) for the purpose of acquiring,
holding, voting (except to the extent contemplated by the proviso to Section
4.4(b)(ii)(B)) or disposing of any securities of the Company.
Notwithstanding anything in this definition of Beneficial Ownership to the
contrary, the phrase, "then outstanding," when used with reference to a Person's
Beneficial Ownership of securities of the Company, shall mean the number of such
securities then issued and outstanding together with the number of such
securities not then actually issued and outstanding which such Person would be
deemed to own beneficially hereunder.
4.5 Market Stand-off. The Investor hereby agrees that during the
period of duration not to exceed 120 days specified by the Company and an
underwriter of capital stock of the Company, following the effective date of a
registration statement pursuant to which the Company is offering securities
under the Securities Act, it shall not, to the extent requested by the Company
and such underwriter (and provided the same restriction is agreed to by the
officers and directors of the Company), directly or indirectly sell, offer to
sell, contract to sell (including, without limitation, any short sale but
excluding private placements in reliance on the so-called "4(1-1/2)" exemption
under the Securities Act), grant any option to purchase or otherwise transfer or
dispose of (other than to donees who agree to be similarly bound) any securities
of the Company held by it at any time during such period except Common Stock
included in such registration. In order to enforce the foregoing covenant, the
Company may impose stop-transfer instructions with respect to the Shares until
the end of such period.
5. Right of First Offer.
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5.1 Right of First Offer.
(a) The Investor shall not make any disposition of all or any
portion (or any interest) of the Restricted Securities, without first giving the
Company the right to accept an offer to purchase such securities, except for any
dispositions that are exempt pursuant to the terms of Section 5.3. Subject to
Section 4.1, at the time the Investor wishes to make a disposition of any or all
of the Restricted Securities, it shall submit an offer to sell all, but not less
than all, of such Restricted Securities which Investor wishes to dispose (the
"Offered Shares") to the Company (the "Offer") by facsimile to the Company's
President or Chief Operating Officer (such facsimile to be received during the
Company's normal business hours and to be confirmed in writing by notice
pursuant to Section 7.6) as follows:
(i) If the Investor wishes to sell the Offered Shares in an open
market disposition, the Offer shall disclose the number of Offered Shares
proposed to be sold. As soon as practicable after receipt of the Offer, but in
no event later than five (5) business days after the Investor makes the Offer,
the Company shall have the option to accept the Offer to purchase the Offered
Shares at the higher of (a) the closing market price on the business day next
preceding the day of the Offer or (b) the closing market price on the business
day next preceding the day the Offer is accepted by the Company. In the event
the Company does not purchase the Offered Shares offered by the Investor
pursuant to the Offer, the Investor may sell the Offered Shares at any time
within 90 days after the expiration of the Offer. Any such sale shall be made in
the open market at the market prices prevailing at the time of the sale.
(ii) If the Investor wishes to sell or otherwise transfer the
Offered Shares in a privately negotiated transaction, whether through
broker-dealers who may act as agent or acquire the Offered Shares as principal,
or otherwise, the Offer shall disclose the number of Offered Shares proposed to
be sold or transferred and the price at which the Offered Shares are offered to
the Company. As soon as practicable after receipt of the Offer, but in no event
later than five (5) business days after the Investor makes the Offer, the
Company shall have the option to accept the Offer to purchase the Offered Shares
at the higher of (a) the price per share set forth in the Offer or (b) the
closing market price on the business day next preceding the day the Offer is
accepted by the Company. In the event the Company does not purchase the Offered
Shares offered by the Investor pursuant to the Offer, and provided that the
price specified in the Offer is not greater than the closing market price on the
business day next preceding the day of the Offer, the Investor may sell or
transfer the Offered Shares at any time within 90 days after the expiration of
the Offer for any price.
(iii) If the Investor wishes to effect an underwritten offering
of the Offered Shares, the Offer shall disclose the number of Offered Shares
proposed to be sold to the underwriters. The Company shall have the option to
purchase the Offered Shares at the higher of (a) the closing market price on the
business day next preceding the day of the Offer or (b) the closing market price
on the business day next preceding the day the Offer is accepted by the Company.
As soon as practicable after receipt of the Offer, but in no event later than
five (5) business days after the Investor makes the Offer, the Company shall
have the option to accept the Offer to purchase the Offered Shares. In the event
the Company does not purchase the Offered Shares offered by the Investor
pursuant to the Offer, the Investor may sell the Offered Shares in
11
an underwritten offering commenced within one hundred twenty (120) days after
the expiration of the Offer.
(b) Any Offered Shares not sold in accordance with the applicable
terms and within the applicable time periods provided in subsection (a) above
shall continue to be subject to the requirements of a first offer pursuant to
this Section.
(c) The provisions of subsections (a) and (b) above shall not
apply to any disposition of Restricted Securities in which the aggregate number
of such Restricted Securities involved in such disposition is less than two
percent (2%) of the aggregate number of Restricted Securities acquired by
Investor (or its Affiliates) under this Agreement and the Wholesale Agreement
(subject to appropriate adjustment in the event of stock splits, stock
dividends, recapitalizations and the like) during any 30-day period.
(d) The provisions of subsections (a) and (b) above shall not
apply to any disposition of Restricted Securities made in a privately negotiated
transaction, whether through broker-dealers who may act as agent or acquire such
Restricted Securities as principal, or otherwise, in which: (i) the aggregate
number of such Restricted Securities involved in such disposition is less than
four percent (4%) of the aggregate number of Restricted Securities acquired by
Investor (or its Affiliates) under this Agreement and the Wholesale Agreement
(subject to appropriate adjustment in the event of stock splits, stock
dividends, recapitalizations and the like); and (ii) no other disposition under
this Section 5.1(d) shall have occurred for a period of at least thirty (30)
days prior to the applicable disposition; and (iii) such disposition shall not
be to an entity a material portion of the business operations of which relates
to the pharmaceutical industry, or to an affiliate of such entity or to a third
party purchasing on behalf of such entity. The Restricted Securities subject to
this Section 5.1(d) shall bear a legend reasonably acceptable to the Company
reflecting the restrictions set forth herein.
(e) If the Company accepts an Offer under this Section, the
closing of such purchase shall occur within ten (10) business days after
acceptance of the Offer by the Company. Upon such acceptance, the Company and
the Investor shall be legally obligated to consummate the purchase contemplated
thereby.
(f) The provisions of this Section 5.1 shall lapse and cease to
have any effect at such time as the Investor owns Restricted Securities which
represent less than three percent (3%) of the outstanding Common Stock of the
Company.
5.2 Binding Effect. The Company's right of first offer shall be
assignable in whole or in part by the Company, (but only after the Company
receives notice of a transfer which is subject to a right of first offer and
only with respect to that individual transaction) and shall inure to the
benefit of its successors and assigns. The Company's right of first offer
shall be binding upon any transferee of any Restricted Securities acquired
pursuant to a disposition that is exempt from the right of first offer
pursuant to the terms of Section 5.3(i).
5.3 Exempt Transfers. The Company's right of first offer shall
not apply to (i) subject to Section 5.2, transfers to controlled Affiliates of
Investor provided the transferee agrees
12
to be bound by the obligations of this Agreement, or (ii) transactions involving
a merger, reorganization, recapitalization or sale of all or substantially all
of the business or capital stock of the Company approved by the Company's board
of directors, or (iii) any tender or exchange offer for more than fifty percent
(50%) of the Company's outstanding voting stock.
6. Additional Covenants.
6.1 Nasdaq National Market Designation. The Company shall give
the Nasdaq National Market timely notice of the issuance of the Shares and shall
use all commercially reasonable efforts to maintain the Non-Quantitative
Designation Criteria contained in Rule 4460 of the NASD Manual to the extent
such criteria are within the control of the Company.
6.2 Reports Under Exchange Act. With a view to making available
to the Investor the benefits of Rule 144 and any other rule or regulation of the
SEC that may at any time permit the Investor to sell the Shares to the public
without registration, the Company agrees to: (a) make and keep public
information available, as those terms are understood and defined in Rule 144, at
all times; (b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and (c) furnish to the Investor, so long as the Investor owns any Shares,
forthwith upon request (i) a written statement by the Company that it has
complied with the reporting requirements of Rule 144, the Securities Act and the
Exchange Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested in availing the Investor
of any rule or regulation of the SEC which permits the selling of any Shares
without registration.
7. Miscellaneous.
7.1 Survival of Warranties. The warranties, representations and
covenants of the Company and Investor contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investor or the Company.
7.2 Successors and Assigns. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any of the Shares sold hereunder). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
7.3 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware as applied to agreements among
Delaware residents entered into and to be performed entirely within Delaware.
13
7.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.5 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing by personal delivery to
the party to be notified or by Federal Express or other overnight package
delivery service or by registered or certified mail, postage prepaid and
addressed to the party to be notified at the following addresses, or at such
other address as such party may designate by five (5) days' advance written
notice to the other parties (with notice deemed given upon receipt):
If to the Company:
Ligand Pharmaceuticals Incorporated
0000 Xxxxx Xxxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
If to Investor:
Xxx Lilly and Company
Lilly Xxxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: General Counsel
7.7 Finder's Fee. Each party represents that it neither is nor
will be obligated for any finders' fee or commission in connection with this
transaction. Each party agrees to indemnify and to hold harmless the other party
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which the indemnifying party or any of its officers,
partners, employees or representatives is responsible.
7.8 Expenses. Irrespective of whether the Closing is effected,
each party shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement. If any
action at law or in equity is necessary to enforce or interpret the terms of
this Agreement, the prevailing party shall be entitled to reasonable attorney's
fees, costs and necessary disbursements in addition to any other relief to which
such party may be entitled.
7.9 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively
but only if so expressly stated), only
14
with the written consent of the Company and Investor. Any amendment or waiver
effected in accordance with this paragraph shall be binding upon each holder of
any securities purchased under this Agreement at the time outstanding, each
future holder of all such securities, and the Company.
7.10 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provisions were so excluded and shall be enforceable in
accordance with its terms.
7.11 Right of Participation in Equity Financings. Subject to the
terms and conditions specified in this Section 7.11, the Company hereby grants
to Investor a right to purchase up to the number of Additional Shares (as
defined below) in connection with any Equity Financing (as defined below)
undertaken by the Company.
(a) Each time the Company proposes to offer shares of any class
of its capital stock (not including any security convertible into a class of
capital stock) in a registered public offering ("Equity Financing"), the Company
shall deliver a notice in person, by air courier or by facsimile ("Notice") to
Investor stating (i) its bona fide intention to undertake such Equity Financing,
(ii) the number of shares to be offered in the Equity Financing (the "Equity
Financing Shares"), (iii) the number of Additional Shares up to which Investor
may elect to purchase in such Equity Financing which would be added to the
Equity Financing Shares, and (iv) the price and terms, if any, upon which it
proposes to offer such shares in the Equity Financing.
(b) Within ten (10) business days after giving of the Notice,
Investor may elect to purchase, at the price and on the terms specified in the
Notice, up to the number of Additional Shares set forth in the Notice. The
number of shares of capital stock ("Additional Shares") that Investor may elect
to purchase and include in the Equity Financing shall be calculated as follows:
Additional Equity Equity
Shares = Financing Shares - Financing Shares
---------------- ----------------
1 - X% 1
X% represents the greater of (i) percentage of the outstanding shares of
the Company then held by Investor, which shares have been acquired by
Investor pursuant to this Agreement and the Wholesale Agreement, or (ii)
the percentage of the outstanding shares of the Company held by Investor
at the Closing.
In the event the number of Equity Financing Shares changes for any reason (other
than including the Additional Shares) after the Notice is delivered to Investor,
the number of Additional Shares shall be recalculated using the new number of
Equity Financing Shares and the Company shall promptly provide a revised Notice
to Investor reflecting such change.
15
(c) The right of Investor in this Section 7.11 shall not be
applicable (i) to the issuance or sale of shares under any plan, agreement or
arrangement, to employees, directors, consultants, customers, vendors, suppliers
or other persons or organizations with which the Company has a commercial
relationship, provided that such issuances are for other than primarily equity
financing purposes, (ii) to the issuance or sale of stock pursuant to Regulation
S (or successor rule or regulation) promulgated under the Securities Act, (iii)
to the issuance of shares pursuant to the conversion or exercise of convertible
or exercisable securities, (iv) to the issuance of shares in connection with a
bona fide business acquisition of or by the Company, whether by merger,
consolidation, sale of assets, sale or exchange of stock or otherwise, (v) to
the issuance of shares to a corporation, partnership, educational institution or
other entity in connection with a research and development partnership or
licensing or other collaborative arrangement between the Company and such
institution or entity, or (vi) to the issuance of shares to persons or entities
with which the Company has business relationships provided such issuances are
for other than primarily equity financing purposes.
(d) Notwithstanding anything to the contrary, Investor's right
hereunder shall not be applicable, and Investor shall have no right, to the
extent that exercising such right should cause Investor (including any
Affiliates), to own more than the greater of (i) percentage of the outstanding
shares of the Company then held by Investor, which shares have been acquired by
Investor pursuant to this Agreement and the Wholesale Agreement, or (ii) the
percentage of the outstanding shares of the Company held by Investor at the
Closing.
(e) Investor's rights and obligations under this Section 7.11
shall not be assignable.
(f) The rights of Investor under this Section 7.11 shall
terminate on the earlier of (i) the fifth anniversary date of this Agreement or
(ii) the consummation of a merger, reorganization, recapitalization, exchange
offer or sale of all or substantially all of the assets of the Company by, with
or to a third party.
7.12 Entire Agreement. This Agreement and the documents referred
to herein constitute the entire agreement among the parties and no party shall
be liable or bound to any other party regarding the subject matter hereof and
thereof in any manner by any warranties, representations, or covenants except as
specifically set forth herein or therein.
[Remainder of This Page Intentionally Left Blank]
16
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
LIGAND PHARMACEUTICALS INCORPORATED
By: ___________________________________
Title: ___________________________________
INVESTOR:
XXX XXXXX AND COMPANY
By: ___________________________________
August X. Xxxxxxxx
Title: Executive Vice President and Chief
Scientific Officer
[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]
17
EXHIBIT A
SCHEDULE OF EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
This Schedule of Exceptions is made and given pursuant to Section 2 of
the Stock Purchase Agreement (the "Agreement") dated as of November 25, 1997 by
and between Ligand Pharmaceuticals Incorporated, a Delaware corporation (the
"Company") and Xxx Xxxxx and Company, an Indiana corporation (the "Investor").
The section numbers in this Schedule of Exceptions correspond to the section
numbers in the Agreement; however, any information disclosed herein under any
section number shall be deemed to be disclosed and incorporated into any other
section number under the Agreement where such disclosure would otherwise be
appropriate. Any terms defined in the Agreement shall have the same meaning when
used in this Schedule of Exceptions as when used in the Agreement unless the
context otherwise requires.
Nothing herein constitutes an admission of any liability or obligation
on the part of the Company nor an admission against the Company's interest. The
inclusion of any schedule herein or any exhibit hereto should not be interpreted
as indicating that the Company has determined that such an agreement or other
matter is necessarily material to the Company. The Investor acknowledges that
certain information contained in these schedules may constitute material
confidential information relating to the Company which may not be used for any
purpose other than that contemplated in the Agreement.
Schedule 2.4 C SEC Reports
On September 26, 1997, the Company filed a Registration Statement on
Form S-1 (the "Registration Statement") with the Securities and Exchange
Commission in connection with the public offering of an indefinite number of
shares of Common Stock, par value $.001 per share (the "Shares") of the Company
with an aggregate value of $46,410,000. In addition, the Company filed a
Schedule 13e-3 with respect to the transaction. All of the Shares will be issued
to the stockholders of Allergan Ligand Retinoid Therapeutics, Inc. ("ALRT"), a
research and development company formed by the Company with Allergan, Inc.
("Allergan") in December 1994. ALRT's stockholders will receive such Shares in
connection with the Company's exercise of its option (the "Stock Purchase
Option") to acquire all of the outstanding shares of ALRT Callable Common Stock,
$0.001 par value per share (the "Callable Common Stock"). The shares of Callable
Common Stock were originally issued pursuant to a subscription offering of
rights to purchase units consisting of one share of the Callable Common Stock
and two warrants to purchase the Common Stock of the Company. The issuance of
the Shares is being registered by the Company on the Registration Statement
pursuant to the Company's obligations, as set forth in Article V of ALRT's
Amended and Restated Certificate of Incorporation to provide the holders of
Callable Common Stock with shares of the Company's Common Stock covered by an
effective registration statement upon exercise of the Stock Purchase Option.
On September 24, 1997, in connection with the Company and Allergan's
exercise of their respective options to purchase Callable Common Stock and
assets of ALRT as set forth in the Registration Statement, the Company and ALRT
also agreed to restructure the terms and
conditions relating to research, development, commercialization and sublicense
rights for the ALRT compounds. Pursuant to the restructuring, the Company will
receive exclusive, worldwide development, commercialization and sublicense
rights to Oral and Topical Panretin (ALRT1057) (currently in pivotal Phase III
clinical trials), ALRT1550 (currently in Phase I/IIa clinical trials for
oncology applications) and ALRT268 and ALRT 324 (two advanced preclinical RXR
selective compounds). Allergan will receive exclusive, worldwide development,
commercialization and sublicense rights to ALRT4310, an RAR antagonist being
developed for topical application against mucocutaneous toxicity associated with
currently marketed retinoids as well as for psoriasis. Allergan will also
receive ALRT326 and ALRT4204 (two advanced preclinical RXR selective compounds).
In addition, Ligand and Allergan will participate in a lottery for each of the
approximately 2,000 retinoid compounds existing in the ART compound library as
of the closing date, with each party acquiring exclusive, worldwide development,
commercialization and sublicense rights to the compounds which they select.
Ligand and Allergan will each receive a royalty based on net sales of products
developed from their selected compounds in addition to the other compounds to
which they acquire exclusive rights. Ligand will also pay to Allergan a royalty
based on net sales of Targretin for uses other than oncology and dermatology
indications and will pay a percentage of royalties payable to Ligand with
respect to sales of Targretin other than in such indications.
In addition to the various agreements reported in the Company's various
SEC filings, on or about the Closing, the Company will have entered into (i)
that certain Closing Agreement to be effective as of November 25, 1997, by and
between the Company and Investor, (ii) the Agreement, (iii) that certain
Collaboration Agreement by and between the Company, Investor and ALRT, (iv) that
certain Development and Licensing Agreement (Targretin) by and between the
Company and Investor, and (v) that certain Option and Wholesale Purchase
Agreement by and between the Company and Investor.
Schedule 2.13 C Intellectual Property
The Company has licensed its rights under certain patent applications
which cover certain pharmaceutical uses of 9-cis-retinoic acid (ALRT1057) to
ALRT. The Company has become aware that a United States patent has been issued
to, and foreign counterparts have been filed by, Xxxxxxx XxXxxxx ("XxXxxxx")
which covers pharmaceutical uses of 9-cis-retinoic acid which may conflict with
the Company's right under the patent applications licensed to ALRT. The U.S.
Patent and Trademark Office ("PTO") has informed the Company that the
overlapping claims are patentable to the Company and stated its intention to
initiate an interference proceeding to determine whether the Company or XxXxxxx
is entitled to a patent by having been first to invent the common subject
matter. The Company cannot be assured of a favorable outcome in the interference
proceeding because of factors not known at this time which may impact the
outcome. In addition, the interference proceeding may delay the decision of the
PTO regarding the Company's application for the Oral and Topical Panretin
(ALRT1057) products. While the Company believes that the XxXxxxx patent does not
cover the use of Oral and Topical Panretin (ALRT1057) to treat leukemias such as
APL and sarcomas such as KS, or the treatment of skin diseases such as
psoriasis, if the Company does not prevail in the interference proceeding, the
XxXxxxx patent might block the Company's use of Oral and Topical Panretin
(ALRT1057) in certain cancers, and the Company may not be able to obtain patent
protection for the Oral and Topical Panretin (ALRT1057) products.
Schedule 2.14 C Capitalization; Options and Warrants
See Schedule 2.4 regarding the issuance of the Shares to the ALRT
stockholders.
